The 1-2-3 Model for stock market performance

The model takes its name from the three major factors that affect the market :

1. Is the market too expensive? YES/NO
    ~The clearest, time-tested measure of whether stocks are cheap or expensive is price-earning ratio(PER)
    ~It is a indicator of how much investor willing to pay per dollar of earning. For example, P/E 10 means investor pay $10 for $1 of current earning.
    ~Compare the company in the same industry. Different industry deserve their PER accordingly. Company historical P/E also a good reference.
    ~In general, high P/E suggest that investor are expecting higher earning growth in the future compare to company in lower P/E. Otherwise, its deem expensive.

2. Are the Feds in the way?  YES/NO
    ~The second factor in determining the stocks direction is the availability of money.
    ~When interest rate are high, its bad for stock market.
   ~Company incur a higher borrowing cost to run the business. Directly it will effect the earning. Drag the share price.
    ~When interest rate fall, people tend to move money out of the bank and seek for higher return. Those fund usually end up in the stock market.

3. Is the market going up? YES/NO
    ~This is refer to whether market momentum is strong or week. When Buy exceed Sell, price goes up. Otherwise, it will be weak.
    ~To see market action, we use all sort of technical indicator like MACD, RSI, ADX or SMA(Simple
      Moving Average)
    ~Share price above SMA means market is going up. Below SMA means stock prices are weak.

Now, ask yourself about the three questions above.

• If you answer to two or three of the 1-2-3 model question is YES ... its time to SELL               At this time, search for undervalue company using Graham's number technique(Net current asset value). Graham suggests that you can safely buy a stock that sells for 66% of Graham Number.
• If you answer to only one of the three question is YES....you can HOLD                              Here is a rule of thumb. Subtract your age from 100. The resulting number is the percentage of your investment portfolio you might consider holding during this mode. 
• When you answer NO to all three questions above.....STRONG BUY

Read more...

ZHULIAN weather the storm well

31/8/2011
Financial Result
Zhulian has just announced its FY2011 third quarter result. To compare with 3Q2010, company's revenue jump 25% to RM91.8m. Following the top line, company's bottom line also sees a 23% increase to RM24.3m. This translate into a EPS of RM0.053.

For the 9 months period, company recorded net profit of RM67.3m. Base on the consistent performance for the past few quarter, Zhulian net profit for FY2011 should exceed RM87m, it achieve for FY2010.

Technical Outlook
Zhulian share price is in a medium downturn since Jun 2010. It recorded a high of RM2.09(adjusted) on 21/6/2010, then all the way south to a low of RM1.50 on 26/9/2011. However, it manage to hold its ground and climbing slowly. MACD positive, ADX positive, MA(14d) to cross over MA(50d) is crucial.

Today, share price (RM1.70) is sitting on the fence of the downtrend line. Can it fall to the right site? Let's keep that in the watch list.

Stock Valuation
For the past twelve month, Zhulian recorded EPS of RM0.198. Base on current share price, it is trading at P/E 8.6x. Being a high yield counter, it should demand 10xPER. Fair price should be RM1.98.

Overall
Zhulian has been declare dividend every quarter. For the last couple of years, company has declare more than 60% of its earning. Despite the generosity, Zhulian's piggy bank worth RM0.29 per share. I think Zhulian is a good dividend stock to hold, providing cash flow in the bull or bear.

Read more...

GAMUDA FY2011 result update

FY31/7/2011
Financial Result
For the current quarter, the group recorded a revenue and profit before tax of RM810.6m and RM151.1 as compare to RM714.7m and RM115.2m in the preceding year comparative quarter.
Company revenue and profit before tax for FY2011 also jumped 8.9% and 32.1% to RM2673.2m, RM544.5m respectively.

Increase in profit from all the division has send Gamuda for another good year. Engineering and Construction division contribute RM143.32m, Property Development and Club Operations contribute RM149.94m and Water and Expressway concessions put RM251.26m into company's perk. 

Technical Outlook
Couple of months ago, i did comment about GAMUDA technically in a "do-or-die" situation. Share price broke above resistance and looks promising. On the other end, "head and shoulder" is waiting if things went wrong.
 As i look back the chart today, it had pan out exactly the way i thought. However, i'm not going to discuss anymore about the past. Always look back will get you sore neck!!
Share price has find a support at RM2.86, one of the support line from Fibonacci. Its also start of the uptrend line 15months ago. I actually think that the sharp sold down recently need some time to absorb. Give it a miss for now and we'll have another look in a forthnight.

Stock Valuation
GAMUDA is trading at RM2.90. Base on FY2011 EPS of RM0.207, it is trading at P/E14x. Company's NTA improve to RM1.79 also means that it is currently trading at P/BV of 1.6x. Base on this two ratio, i think Gamuda is pretty attractive.

Overall
Euro and US economy crisis has make the market panic, lose their direction. With another year of great financial result, backed by good fundamental. I think GAMUDA share deserve a better price. The only reason i can think of is Institutional investor and fund managers pulling off. Shall we follow the "smart money" to get out or choose to be "not so smart".... i don't know!

Read more...